Building Your Business Emergency Fund: A Must-Have Safety Net!

Starting a business is an adventure filled with excitement and challenges. One of the smartest moves you can make early on is to establish an emergency fund. An emergency fund isn't just a good idea; it's your business's safety net for those "just in case" moments. If you follow the Profit First method, this would be the “Profit” account.

Here’s how you can start building yours today:

Start Small, Aim Big

Begin by setting aside a small, manageable amount each month. Over time, aim to save enough to cover 3-6 months of operating expenses. In the Profit First book, the author suggests to start by just setting aside 1% of your revenues to your profit account.

Cut Unnecessary Costs

Review your expenses regularly and cut down on non-essential spending. Every penny saved is a penny closer to your safety net. Every day, you get so many temptations to pay for new products and apps. Some of them end up really benefitting your business, but others prove to not be the right fit after using them for a month or two. The problem is that most of these products hook you in by requiring a monthly subscription, or worse, by paying a full year upfront. As a business owner, you need to be very disciplined and diligent when it comes to your business finances. After all, this is your own hard earned money! So, every quarter, set up a reminder to go over your vendor list and review current expenses coming out. If it is not something you are still using, make sure to take action and cancel the service!

Open a Dedicated Savings Account

Your emergency fund should be easily accessible without being too tempting to use for non-emergencies. Consider a separate savings account or a money market account for the right balance of access and growth.

We, at Key Accounting, are certified banking partners at Relay. Relay offers the ability to open up to 20 individual bank accounts for your business. Relay is the official banking platform for businesses looking to follow the Profit First method! If you are interested in opening an account with Relay, here is our referral link. Please note that we may earned at small commission if you open and fund a new account at Relay.

Automate Your Savings

Set up automatic transfers to your emergency fund. It’s an effortless way to ensure consistent savings without having to think about it.

This is one of our favorite features at Relay. You can automate all your transfers! The recommendation is to have one bank account for all your incoming deposits, and to setup automatic transfer rules so that you transfer a percentage of all your revenues to your Profit account (savings), your operating account, your tax account, and your owner compensation account. There is no more second guessing or manual calculations required!

Reevaluate and Adjust

As your business grows, so will your operating expenses. Reevaluate your emergency fund regularly to ensure it matches your current needs.

An emergency fund can be the difference between weathering a storm and facing a financial crisis. Start building yours today to ensure your business stays resilient no matter what comes your way.

Let's build a secure foundation for your business together! If you need help finding bookkeeping services that fit your business needs, schedule a a call with us today!